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Minimum wage truths

Minimum wage truths

Acolytes
for government-mandated minimum wages – and they are legion among public policy makers in Greater
Pittsburgh — keep insisting that everyone wins when wage floors are set by
government fiat instead of by the marketplace.

Not only are
those on the lowest rung of the employment ladder better off and welfare payments
are reduced, hey, those paid a higher minimum wage pay more in taxes to the
government. It’s a “win-win-win,” they claim.

Reality,
however, continues to intrude as the tales of business closings, fewer jobs and
fewer hours grow in places where government has chosen to intervene. What was
it, again, that they were saying about reducing the welfare rolls?

Take, for
example, New York, where government decreed a $15 an hour wage minimum last
December. Reports one media outlet: “Big Apple restaurants are feeling the
heat from minimum-wage hikes, cutting staff hours and even closing kitchens as they
struggle to shoulder the extra payroll costs.”

Continued
the account:

“In a survey of
324 full-service restaurants, the New York City Hospitality Alliance found that
76.5 percent of respondents cut staff hours and 36.3 percent eliminated jobs,
including whole layers of middle management, in response to mandated wage
increases.”

This experience
is being reported all over the country (despite a few less than scholarly
studies that have attempted to sprinkle magic dust on the ground manure remains
of market interventionism).

So, again, what exactly
is the “benefit” of arbitrarily raised wage floors?

As legendary Wall
Street Journal reporter and economics scholar Henry Hazlitt reminded in his
seminal work, “Economics in One Lesson”:

“You cannot make
a man worth a given amount by making it illegal for anyone to offer him
anything less. You merely deprive him of the right to earn the amount that his
abilities and situation would permit him to earn, while you deprive the
community even of the moderate services that he is capable of rendering.”

“In brief,”
Hazlitt summarized, “for a low wage you substitute unemployment. You do harm
all around, with no comparable compensation.”

So, how should
low wages rise? It’s fundamental and known as productivity.

Again, from Henry
Hazlitt:

“The more the
individual worker produces, the more he increases the wealth of the whole
community.

“The more he
produces, the more his services are worth to customers, and hence to employers.

“And the more he
is worth to employers, the more he will be paid.

“Real wages come
out of production, not out of government decrees,” Hazlitt states the obvious.

But, sadly and
tragically, it is an “obvious” to which too many public policy makers are
either oblivious or purposely ignore in the name of government “beneficence”
and political expediency.

Colin
McNickle is communications and marketing director at the Allegheny Institute
for Public Policy (cmcnickle@alleghenyinstitute.org).